Union Budget 2024: What were hits and misses for Construction & Real Estate
Real estates stocks hits downs as proposed to eliminate the indexation benefit.
As the Central Government has made significant investments over the years in building and improving infrastructure has had a strong multiplier effect on the economy. This year, government will provided Rs 11,11,111 crore for capital expenditure for the infrastructure this would be 3.4 per cent of our GDP and which would help the Construction & Real Estate sectors.
PM Awas Yojana Urban 2.0, housing needs of 1 crore urban poor and middle-class families will be addressed with an investment of Rs 10 lakh crore. Three crore additional houses under the PM Awas Yojana in rural and urban areas in the country have been announced.
For the Industrial Parks government will facilitate development of investment-ready “plug and play” industrial parks with complete infrastructure in or near 100 cities, in partnership with the states and private sector, by better using town planning schemes.
These schemes in the different areas of infrastructures will indirectly boost the Construction sector in our country. For the Stamp Duty government will encourage states which continue to charge high stamp duty to moderate the rates for all, and also consider further lowering duties for properties purchased by women. This can increase real estate activities in country.
For the real estate sectors there was one major news by Finance Minister Nirmala Sitharaman proposed to eliminate the indexation benefit on calculating long term capital gains tax (LTCG) on real estate.
Before the announcement, LTCG from property sales were taxed at 10 per cent with indexation benefits. Taxpayers could adjust the purchase price using the Cost Inflation Index (CII) numbers specified by the Income Tax Department. According to the Budget documents, the new tax rate for long-term capital gains on property sales will be 12.5 per cent without indexation benefit. Lets understand this with help of example:
Under the old taxation rules
Purchase price: Rs 50 lakhs
Indexation benefit adjusted purchase price using CII: Rs 64,82,000
Sale price 2024-25: Rs 70 lakhs
Gain: Rs 5,18,000
Tax liability under old LTCG rules: Rs 1,03,600
Under the new taxation rules
Purchase price: Rs 50 lakhs
Sale price 2024-25: Rs 70 lakhs
Gain: Rs 20 lakhs
Tax liability under new LTCG rules: Rs 2,50,000
However, the bill is just purposed yet not passed but the effect of the proposal has been seen in the market as BSE Realty has fall by 2.15 per cent today. Most of the stocks in Real Estate sectors were closed in red.
Disclaimer: The article is for informational purposes only and not investment advice.